Homeowners Insurance Glossary

Warner and Company explains some of the most common homeowners insurance terms in this online insurance glossary.

Glossary

Actual Cash Value

The basis of loss settlement in property insurance policies, which takes
into consideration factors such as replacement value less depreciation,
market value, rental value, the use of the building, the area in which
it is located, obsolescence, assessed valuation, and any other factor
that would have an effect upon the value. A working rule-of-thumb
definition is "replacement cost new at the time of loss, less
depreciation."

Deductible

The amount which must first be subtracted from the total damage incurred
before determining the insurance company's liability. Deductibles can
be a set dollar amount or a percentage of the dwelling value. Two
deductibles can apply on a single policy. Some policies may have one
deductible that applies to wind and hail damage and another for all
other losses. If this is the case, the wind and hail deductible is
usually much larger than the deductible for all other losses.

Dwelling

A dwelling is a house in which people live, as distinguished from a garage, storage building or any other building.

Homeowners/Condo/Renters Optional Coverages

There are literally 100 or more options to provide coverage or increase
the coverage provided by the standard homeowners policy. While it may
seem simple to properly insure your home and its contents at first, a
review with your agent of the limitations and exclusions of the policy
often reveal a number of modifications that should be made to provide
the coverage you desire.
The most common areas needing modification are:
Replacement cost coverage on both home and personal property (contents)Broadened contents coverage
Sewer and water backup
Jewelry, silver, musical instruments, and some types of sports equipment
Fine arts, china and crystal
Guns
Cash
In-home businesses of all types, including part-time or seasonal "hobby" businesses
The addition of watercraft, recreational vehicles
Extension of liability coverages to farmland or other property owned by the policyholder
Special computer hardware or software coverage or electronic equipment
Increased limits for other buildings or structures on the premises
Condominium and renters - additions and alterations coverage, Loss Assessment
Personal Umbrella policies are the most cost-effective and popular
method of obtaining the coverage needed when higher limits of liability
than available on home and auto policies are needed.

Let your agent know about any situations or property you own that is
slightly different or unique so you can discuss how your insurance would
apply.

Liability Insurance

Protection that pays sums the insured is legally obligated to pay, or that the insurer has agreed to pay, as damages to others as a result of the insured's negligence. Usually provides coverage arising from alleged bodily injury or property damage to others.

Loss of Use Coverage

Loss of Use Coverage compensates the policyholder for the inability to
use property that was damaged or destroyed by an insured peril. For
example, if a home is damaged by fire, the Loss of Use helps meet the
increased costs of living such as hotel bills, or a rental home, eating
out or other living expenses while the home is being repaired.

Medical Payments Coverage

Reimburses for the necessary expenses for medical, hospital and funeral
costs for persons other than the "insured" or employees of the insured,
who are injured while on the insured's premises. The coverage is
available whether the policyholder is liable or not.

Other Structures (detached garage, gazebos, etc.)

Other structures on a homeowner's policy refer to structures other than
the dwelling and are separated from the dwelling by clear space. This
would typically include detached garages, storage sheds, gazebos,
fences, etc.

Personal Property

Property other than land and buildings often referred to as "contents."
Also includes the contents found in other structures. Certain types of
property have specific dollar limits or are subject to exclusions.

Replacement Cost

When used in property insurance contracts, this is the amount it would
take to replace the property with like property of the same quality and
construction. No deduction is made for depreciation or obsolescence.